Latest news with #GovernanceActionPlan
India.com
20-05-2025
- Business
- India.com
More shame for Pakistan as it can't make its budget too, IMF takes charge, imposes 11 new conditions on..., issues strong warning against...
More shame for Pakistan as it can't make its budget too, IMF takes charge, imposes 11 new conditions on..., issues strong warning against... After a long struggle, Pakistan is finally set to receive a USD 1 billion loan from the International Monetary Fund (IMF). For quite some time now, Pakistan has been depending heavily on loans from institutions like the World Bank and IMF, as well as countries like China. It has also received cheap oil and financial support from Saudi Arabia on several occasions. But this constant borrowing has come at a cost as Pakistan's financial independence has gradually weakened. The situation is now such that the country can't even finalize its national budget on its own. On June 2, Pakistan plans to present its national budget. However, before doing so, it must consult the IMF. In fact, an IMF team has already arrived in Islamabad. Pakistani finance ministry officials will now discuss the budget details with this team, and only after those talks will the final proposals be decided. This shows how much Pakistan's economic decisions now rely on external approval. As par various reports, the IMF will play a key role in deciding how much money Pakistan can allocate for infrastructure in its upcoming budget. It will also help determine how much should go towards paying interest on existing loans and how much should be set aside for economic reforms. This isn't new as for the past several years, the IMF has had a strong influence on how Pakistan prepares its budget. The IMF insists that Pakistan's budget must focus on maintaining economic stability. It also wants the country to set aside a financial buffer to deal with unexpected situations. IMF's 11 new conditions on Pakistan Before approving the latest loan installment, the IMF has placed 11 new conditions on Pakistan, bringing the total number of conditions imposed so far to 50. These range from spending cuts to structural reforms, showing how tightly Pakistan's economy is now tied to IMF oversight, according to local Pakistani news portal Express Tribune's report on 18 May 2025. According to IMF conditions, Pakistan's total national budget has been capped at 17.6 trillion Pakistani rupees. Out of this, the government is allowed to spend only 1.07 trillion rupees on development projects. The IMF has also pushed for strengthening the tax system, including a proposal to tax agricultural income. Additionally, Pakistan's government has been asked to publicly release a Governance Action Plan, ensuring transparency and allowing citizens to monitor the reforms being implemented. The IMF has also restricted subsidies on electricity bills. This means the Pakistani government can no longer offer excessive discounts to its citizens on power rates, and must limit any relief beyond a certain point. The government has also been directed to make and publish a plan to outline the post-2027 financial sector strategy to highlight the regulatory environment from 2028 onwards, according to the local news portal's report. The IMF also directed the government to issue a notification on semi-annual gas tariffs to maintain the energy tariffs at cost recovery levels by February 15, 2026. As part of the condition, Pakistan also has to submit a bill for listing all quantitative restrictions on used motor vehicle imports, which are less than five years old by end of July 2025. According to the news portal's report, vehicles up to three years old can currently be imported into the nation.
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Business Standard
18-05-2025
- Business
- Business Standard
Tensions with India may derail bailout scheme's goals: IMF warns Pakistan
The International Monetary Fund (IMF) has warned Pakistan ahead of the release of the next tranche of its bailout programme, saying that tensions with India could "heighten risks to the scheme's fiscal, external, and reform goals". In its first review of the over $1 billion bailout programme, the IMF noted the tensions between India and Pakistan following the April 22 Pahalgam terror attack, in which 26 people were killed. The report said that so far, the market reaction in Pakistan had been modest, with the stock market retaining most of its recent gains and spreads widening moderately. "The rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten enterprise risks to the fiscal, external and reform goals of the program. Reputational risks could also come from any perceived lack of evenhanded or if there was a perceived misuse of fund disbursements," the report said. The IMF report places Pakistan's defence allocation for the upcoming fiscal year at PKR 2.414 trillion, reflecting a 12 per cent increase or PKR 252 billion more than the previous year. In contrast, the government has signalled plans to allocate over PKR 2.5 trillion, marking an 18 per cent rise, following the recent escalation with India earlier this month. IMF imposes fresh conditions on Pakistan The IMF also slapped 11 new conditions on Pakistan for the release of the next tranche of its bailout programme. This takes the total conditions imposed on Pakistan to 50. A key condition requires the parliamentary approval of the FY26 budget—projected at PKR 17.6 trillion, including PKR 1.07 trillion for development spending—by the end of June 2025, in line with IMF programme targets. On the provincial side, the four federating units must implement new agricultural income tax laws, supported by digital platforms for taxpayer registration, return processing, and compliance measures, with a deadline of June 2025. The IMF also expects Islamabad to publish a Governance Action Plan, based on findings from the Fund's Governance Diagnostic Assessment, to address persistent governance weaknesses. Pakistan must also unveil a post-2027 financial sector strategy, outlining long-term institutional and regulatory reforms from 2028 onwards. In the energy sector, four conditions have been introduced to ensure cost recovery and reduce circular debt: the rebasing of electricity tariffs by July 1, 2025, a semi-annual gas tariff adjustment by February 15, 2026, legislation to make the captive power levy permanent, and the removal of the PKR 3.21/unit cap on the debt servicing surcharge—currently hindering full cost recovery. The IMF has mandated Pakistan to draft a plan for phasing out incentives related to Special Technology Zones and other industrial parks by 2035, with the reform roadmap due by the end of this year. The Fund also wants the government to introduce legislation in Parliament by July 2025 to lift quantitative restrictions on importing used vehicles, initially for cars less than five years old—expanding the current limit set at three years. IMF loan to Pakistan On May 9, the IMF approved the immediate disbursement of about $1 billion to Pakistan under the ongoing Extended Fund Facility. The global lender said that Pakistan's 37-month EFF was approved on September 25, 2024, and "aims to build resilience and enable sustainable growth", with priorities including entrenching macroeconomic sustainability. India opposed the IMF's extension of fresh loans to Pakistan, saying they could be misused for financing state-sponsored cross-border terrorism. New Delhi also abstained from voting at the crucial IMF meeting.
